The Aave community is evaluating Polygon’s proposal to withdraw the lending protocol from its Proof-of-Stake (PoS) chain.
In a Dec. 16 proposal, Aave Chan founder Mark Zeller highlighted the potential risks associated with Polygon’s plans to rehypothesize stablecoin reserves, while also has adjusted the risk parameters of V2 and V3 deployments on the Ethereum Layer 2 blockchain and suggested that it should eventually be withdrawn. Entire network.
Zeller claimed that this measure will protect Aave from vulnerabilities associated with bridge stablecoins, reducing long-term security threats.
Aave is Polygon’s largest decentralized application (dApp), accounting for $468 million, approximately 40% of the Ethereum Layer 2 network’s total value locked (TVL) of $1.3 billion. Masu. However, the proposed withdrawal will only affect 2% of Aave’s overall TVL and 1.5% of its fee income.
Reasons why AAVE is considering withdrawing from Polygon
The move follows a controversial yield-generating proposal on the Polygon network that has raised security concerns.
Earlier this month, Polygon’s community received a proposal to deploy DAI, USDC, and USDT stablecoin reserves from the Polygon PoS Portal Bridge to selected liquidity pools.
The authors claimed that this strategy could generate up to $70 million in profits and stimulate new ecosystem incentives to grow Polygon’s DeFi landscape.
However, Zeller pointed out significant risks associated with this approach, drawing parallels to past bridge-related security breaches such as the Ronin and BNB bridge hacks that resulted in significant losses for users.
He criticized Polygon’s proposal as riskier than alternatives such as Ethereum’s liquid staking or MakerDAO’s DAI savings module.
ACI founders also questioned the logic of risking billions of dollars in potentially bad loans for negligible income. He said:
“Polygon is 1.5% of Aave DAO’s revenue. In what world would we owe billions in bad debt for this?”
Community reaction
The cryptocurrency community has been largely supportive of Aave’s cautious approach to protecting users’ funds.
Cryptocurrency investor Adam Cochran pointed out that the bridge already poses significant risks, and adding a staking mechanism to generate on-chain profits will only exacerbate the risks. He said Polygon’s move was a miscalculation.
He said:
“Good argument from Aave. Bridges are already dangerous enough. Introducing asset recovery just for the chain to make a profit is not in the interests of users or projects.”
Meanwhile, legal analyst Gabriel Shapiro said Aave’s response highlights the influence decentralized apps can have in shaping governance decisions. He predicted that Aave’s strong stance could thwart Polygon’s yield proposal and set a precedent for prioritizing responsible practices in DeFi.
mentioned in this article
